On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Burlington County, Docket No. FM-03-743-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 17, 2007
Before Judges Collester and C.S. Fisher.
In this appeal, defendant Anthony Zarillo seeks our review of an order that held him in contempt and imposed sanctions for his failure to more quickly pay an award of counsel fees to plaintiff's attorney. To explain why we will vacate both the order under review and an earlier interlocutory order, we are required to briefly outline the procedural events that have brought us to this point.
The parties were married in 1987. Plaintiff Jeanne Zarrillo filed this action in 2003, and a dual judgment of divorce was entered on December 1, 2005, based on extensive findings of fact and conclusions of law rendered after a trial. As presently relevant, the judgment required that defendant compensate plaintiff for her share of the marital home, which defendant was permitted to retain; the judgment did not contain a date for that payment. And plaintiff was awarded $10,000 in counsel fees, but that also was "payable by defendant when he satisfies plaintiff's interest in the former marital home."
Sometime the following year, Mark Guralnick, Esq., who had represented plaintiff during the earlier proceedings, filed a motion on his own behalf. Asserting he had not received $45,883.70 in fees he claimed were due from plaintiff, Guralnick sought: (1) enforcement of plaintiff's right to the $10,000 counsel fee award; (2) a sale of the former marital home; and (3) a lien on plaintiff's portion of the proceeds from the sale of the former marital home. The record further reveals that plaintiff and Guralnick were then engaged in a fee dispute that was being arbitrated pursuant to R. 1:20A.*fn1 Plaintiff and defendant, both appearing pro se, opposed Garulnick's motion.
In his opposing certification, defendant claimed that a downturn in the real estate market had frustrated his attempts to comply with the equitable distribution provision of the judgment of divorce. However, he certified that he had refinanced the property, and, with those loan proceeds and funds from another source, he was able to pay plaintiff her share of the marital home. He also indicated that he remained unable to pay plaintiff the $10,000 counsel fee.
In an order entered on July 21, 2006, the trial judge granted Guralnick's request that plaintiff be enjoined from dispensing with the equitable distribution proceeds she had obtained from defendant pending the fee arbitrator's decision. The judge also held that defendant was obligated to pay the $10,000 counsel fee award directly to Guralnick, even though the judgment of divorce required that those funds be paid to plaintiff. In addition, the judge ordered that defendant make that payment to Guralnick by November 30, 2006, and that his "[f]ailure to do so shall result in the entry of a judgment of $10,000 against defendant with judgment interest accruing as of the date of the motion."
We are troubled by the procedural underpinnings for this order. Since Guralnick and plaintiff were engaged in a fee dispute, as to which plaintiff had demanded arbitration pursuant to R. 1:20A, plaintiff had no right to seek payment of those fees in the superior court. See R. 1:20A-6. The judge recognized this, but also recognized that the superior court is empowered, notwithstanding the parameters of R. 1:20A, to grant relief that preserves the res of the arbitration. See Steiger v. Armellino, 315 N.J. Super. 176 (Ch. Div. 1998) (holding that an independent action for an injunction could be maintained by an attorney to preserve the status quo pending the completion of arbitration). Accordingly, the judge permissibly restrained plaintiff from expending the funds she had obtained from defendant in equitable distribution. However, the trial judge exceeded her equitable power to maintain the status quo pending arbitration by transferring plaintiff's right to $10,000 from defendant to Guralnick and ordering that this sum be paid by defendant to Guralnick by November 30, 2006. This was erroneous, particularly when it was conceivable that the results of the arbitration might have reduced Guralnick's fee to an amount less than $10,000. In other words, unless Guralnick succeeded in obtaining an award of at least $10,000 in the arbitration, the judge's direction that defendant pay him the $10,000 counsel fee award provided Guralnick with a windfall. In addition, the judge also appears to have assumed that defendant's future failure to pay the $10,000 to Guralnick would warrant the entry of a judgment in favor of Guralnick despite the fact that the judge could not then know whether there might be some other equitable reason for not compelling payment at that time.
When defendant failed to pay the $10,000 to Guralnick by the date indicated in the July 21, 2006 order, Guralnick filed a motion, which he described as a motion "for enforcement of litigant's rights." Guralnick sought an order that would declare defendant in contempt and determine his liability to Guralnick in the amount of $10,000 together with interest and sanctions. With the trial judge's transfer to a different division, the matter was assigned to another judge (hereafter "the motion judge"). After hearing argument, the motion judge held defendant in contempt, ordered him "to immediately remit" $10,000 to Guralnick, and awarded additional counsel fees to Guralnick in the amount of $1,980. The January 19, 2007 order also stated that the judge had granted Guralnick's "application to reduce the outstanding counsel fee award of $10,000 plus interest to judgment," and authorized that the judgment "be recorded as a lien." It is not entirely clear to us whether the judge entered a separate judgment or whether the January 19, 2007 order was intended to operate as a judgment.*fn2
Defendant appealed the January 19, 2007 order, chiefly arguing that his claim that he was financially unable to pay the $10,000 award had not been explored or fairly considered and that the record failed to support a finding that he was in "contempt" of the earlier order. We agree with defendant's contention that he was entitled to have the judge consider his ability to pay the $10,000 award before being compelled to comply under penalty of the imposition of a judgment. We also agree that the motion judge mistakenly labeled defendant's failure to pay as an act of "contempt." See Saltzman v. Saltzman, 290 N.J. Super. 117, 125 (App. Div. 1996); Pierce v. Pierce, 122 N.J. Super. 359, 360 (App. Div. 1973).*fn3
But we vacate the order under review for more elemental reasons. As indicated, we are concerned with the procedure adopted by the trial judge and later adhered to by the motion judge. Guralnick has managed, through this faulty process, to obtain from defendant a judgment, or its functional equivalent, without ever having filed a complaint seeking monetary relief against defendant. We cannot endorse such proceedings or the orders they produce. Guralnick's claim should have been embodied in a complaint that would have put defendant on notice of the relief sought.*fn4 That would have triggered the panoply of procedural rights to which defendant was entitled and would have brought into clearer focus for the trial court the nature of the dispute between the parties. Even though defendant has only appealed the January ...